Overview
Wealthsimple's Bond portfolio is a managed investing portfolio that we automatically invest for you. Because it doesn't have a lock-in period or set maturity date, you can fund and withdraw from it at any time without penalties.
What the portfolio invests in
The Bond portfolio holds ETFs that invest in various fixed-income assets, including:
- Government bonds
- Corporate bonds
- T-bills
- Collateralized loan obligations
- Credit default swaps
- Other fixed-income assets
Current yield
The Bond portfolio targets a yield that exceeds the Wealthsimple Cash rate by 0.5–1%. Right now that means that current yields are around 4% annualized.
Eligible account types
You can invest in a Bond portfolio in the following account types:
- Tax-Free Savings Account
- Registered Retirement Savings Plan
- First Home Savings Account
- Non-registered
Open a Bond portfolio
You can only open a Bond portfolio on the Wealthsimple mobile app. They're not available on the Wealthsimple website yet.
Follow these steps to open a Bond portfolio:
- Sign in to the Wealthsimple app on your mobile device
- From the Home tab, scroll down and tap + Add an account
- Select Open a new account
- Choose what type of account you want to open
- Select Bond portfolios from the investment options menu
- Review information about Bond portfolios and tap Get started
- Answer questions to assess your suitability
- Follow the prompts to open your Bond portfolio
Compare the Bond portfolio to other Wealthsimple options
Compare our Bond portfolio, Cash account, and High-Interest Savings Account options below:
Bond portfolio | Cash | High-Interest Savings Account | |
---|---|---|---|
What is it | Managed investment portfolio | Checking and savings account | Registered savings account |
Purpose | Short and medium-term goals | Everyday finances | Short and medium-term goals |
Current yield* | 4.2% for all client tiers |
Core: 2.00% Premium: 2.50% Generation: 3.00% |
Core: 2.00% Premium: 2.50% Generation: 3.00% |
Management fee |
Core: 0.50% Premium: 0.40% Generation: 0.20%–0.40% |
None | None |
Transfer timelines | 1-2 business days | Instant | 1-2 business days |
Frequently asked questions
Why choose a bond portfolio over holding cash?
The bond portfolio can offer a higher yield than just holding onto your extra cash, and it can add up over time if you're comfortable taking a small amount of risk.
Although you can certainly do worse than holding your money in a Wealthsimple Cash account, investing in our low-risk bond portfolio might perform even better. Over a few years, the probability of outperforming Cash is 80-90%, and the probability of having losses over that period is very low. And even if you happen to underperform Cash once in a while, it typically won't be by much.
Can I access my funds whenever I need them?
Yes. Unlike GICs, you can withdraw your money anytime, without commitment periods or penalties. Just keep in mind that it takes 1-2 business days to process the sale of your bond portfolio.
Why choose a managed bond portfolio instead of buying individual bonds or bond ETFs myself?
First, the risk of one company defaulting matters a lot less when you hold a diversified portfolio of bonds, rather than picking a few yourself.
We believe professional, active management has advantages over choosing individual bond ETFs. A good bond portfolio carefully mixes two kinds of risks that balance each other out: the risk that borrowers might not repay their loans (credit risk) and the risk that interest rates might change (duration risk). We change how much of each risk we take on as the market changes, and we do it for two reasons:
- To lower the chance of losing money
- To earn you more interest than you would by just keeping your money in a savings account
You won't find those features in an off-the-shelf index ETF, which simply takes the issuance of bonds as they come. So, if the government issues a lot of bonds, you buy those. If risky corporations issue a lot of credit, you buy those. It's not optimized for spreading out risk or protecting your money when markets aren't performing in your favour. As a result, you might not earn as much money as you should for the risk you're taking — and if there's a market downturn, you might even lose more money than you'd expect.
What fees are associated with the bond portfolio?
The Wealthsimple bond portfolio has two types of fees. And as you might expect from us, they're pretty low.
The first is a management fee. It's what you pay us to take care of your investments. The amount you pay depends on your tier:
- Core: 0.50%
- Premium: 0.40%
- Generation: 0.20%–0.40%
The second is a Management Expense Ratio (also known as an MER). This goes towards the funds we use in your portfolio and is, on average, about 0.2%.
How is this different from GICs, HISAs, or investing in bonds directly?
The bond portfolio aims to give you reliable returns, but without the drawbacks of other options. Here are some of the advantages:
- Unlike Guaranteed Income Certificates (GICs), you can access your money at any time, because it's not locked in.
- Compared to High-Interest Savings Accounts (HISAs), this portfolio offers higher expected returns by investing in bonds instead of cash.
- If you're considering managing your own portfolio of bond ETFs directly, this portfolio saves you the hassle of reinvesting, rebalancing, or adapting to changing market environments, while keeping fees much lower than the average mutual fund.
How do you pick what the bond portfolio invests in?
We keep a close eye on a variety of fixed-income opportunities to strike the right balance between yield and risk. Actively managed, our portfolio spans the below asset classes, shifting with the market to stay ahead.
What are the benefits of short-term bonds?
Short-term bonds are a great way to keep your money stable while earning predictable returns. They're less risky than stocks, easier to liquidate compared to Guaranteed Income Certificates, and generally less affected by changes in interest rates than longer-term bonds.
When is the interest paid out?
The interest from the bonds in your portfolio lands in your account every month. We'll automatically reinvest it so that all of your money is working harder, bringing you closer to your financial goals.
What are the risks associated with this portfolio?
Like all investments, this bond portfolio isn't entirely risk-free. While it focuses on high-quality, low-risk bonds, bond values may decline if interest rates rise. There's also some credit risk: during major market downturns, like in 2008 or 2020, the chance of defaults increases, which could lead to minor losses. Our team works hard to keep risks low, but it's important to remember that returns aren't guaranteed.
How does a portfolio of bond ETFs compare to a portfolio of individual bonds?
A portfolio of bond ETFs basically gets you a basket of bonds within a single fund, adding instant diversification and reducing the impact of any single issuer's default. By contrast, building your own diversified portfolio of individual bonds requires purchasing multiple securities, then managing them, which can be both time-consuming and more expensive.
Bond ETFs are highly liquid, trading on stock exchanges throughout the day, while individual bonds often have limited liquidity, incur higher transaction costs, and may be difficult to sell before maturity without incurring losses. One last thing to keep in mind is that bond ETFs may provide regular income distributions and are professionally managed, they also charge management fees, whereas individual bonds have no management fees (because you have to manage them yourself).
How is the current yield calculated?
The current yield for the Bond ETF portfolio is calculated based on annualizing the most recent dividend payments and the latest available ETF prices at the time of the calculation. The yield presented represents a weighted average of the individual ETF yields, with each ETF's yield weighted according to its proportion within the portfolio. The yield takes into account ETF management expense ratio (MER) fees but excludes Wealthsimple's standard management fees for its advisory services. The yield information is updated on a monthly basis. It is worth noting that the yield is subject to change due to fluctuations in dividend payments, ETF prices, and portfolio composition. Past performance is not indicative of future results.
Is my yield guaranteed?
No. Your yield and interest payouts are variable based on market conditions.
When are my funds invested in bonds after I make a deposit
Your funds will be invested the next business day after their deposited
Can I transfer bonds in-kind to my Wealthsimple bond portfolio?
Unfortunately, no.
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